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Escaping Social Pressure: Fixed-Term Contracts in Multi-Establishment Firms

Bassanini, Andrea; Caroli, Eve; Fontaine, François; Reberioux, Antoine (2021-01), Escaping Social Pressure: Fixed-Term Contracts in Multi-Establishment Firms. https://basepub.dauphine.fr/handle/123456789/21653

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Type
Document de travail / Working paper
Date
2021-01
Publisher
IZA - Institut zur Zukunft der Arbeit
Series title
IZA Discussion Papers
Series number
14029
Published in
Bonn
Pages
64
Metadata
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Author(s)
Bassanini, Andrea
Institute for the study of labor [IZA]

Caroli, Eve
Institute for the Study of Labor [IZA]
Laboratoire d'Economie de Dauphine [LEDa]
Fontaine, François cc
Paris Jourdan Sciences Economiques [PJSE]
Institute for the Study of Labor [IZA]
Reberioux, Antoine cc
Laboratoire Dynamiques Sociales et Recomposition des Espaces [LADYSS]
Abstract (EN)
We develop a simple theoretical model showing that, by adding to the adjustment costs associated with permanent contracts, local social pressure against dismissals creates an incentive for CEOs to rely on fixed-term contracts, in an attempt to escape social pressure. Using linked employer-employee data, we show that establishments located closer to headquarters have higher shares of fixed-term contracts in hiring than those located further away whenever firms' headquarters are located in self-centered communities and the CEO not only works but also lives there. We show that these findings can only be explained by local social pressure.
Subjects / Keywords
Social pressure; employment contracts; adjustment costs; CEO reputation
JEL
R12 - Size and Spatial Distributions of Regional Economic Activity
J23 - Labor Demand
J41 - Labor Contracts
M14 - Corporate Culture; Diversity; Social Responsibility
M55 - Labor Contracting Devices